Rupee Cost Averaging — Mutual Fund Term Explained

The benefit of investing a fixed amount regularly: you buy more units when NAV is low and fewer when high, reducing your average cost.

Rupee cost averaging is the effect of investing a fixed amount at regular intervals. When NAV is high, your fixed amount buys fewer units; when NAV is low, the same amount buys more. Over time, your average cost per unit is lower than the average NAV.

This is the primary mathematical benefit of SIPs.

Related terms

• SIP (Systematic Investment Plan) — Investing a fixed amount in a mutual fund at regular intervals — typically monthly. Builds discipline and uses rupee cost averaging to reduce timing risk.
• NAV (Net Asset Value) — The price of one unit of a mutual fund, calculated daily from portfolio value minus liabilities divided by units outstanding.
• Lump Sum Investment — Investing a large amount all at once, as opposed to via SIP. Better when markets are cheap; riskier at market peaks.

Browse the full mutual fund glossary, or see this concept in action in the fund screener.